The Effects of Changes in State Tax Enforcement on Corporate Income Tax Collections

Posted: 13 Feb 2012 Last revised: 29 May 2018

See all articles by Sanjay Gupta

Sanjay Gupta

Michigan State University - Eli Broad College of Business

Dan Lynch

University of Wisconsin - Madison - Department of Accounting and Information Systems

Date Written: September 1, 2015

Abstract

Using a new hand-collected database on state department of revenue (DOR) expenditures, this study examines the association between changes in state corporate tax enforcement expenditures and state-level tax collections during the 2000-2008 time period. The results, after addressing endogeneity concerns using a changes specification and state fixed effects, suggest a one dollar increase (decrease) in current period corporate enforcement is associated with a $8 to $11 increase (decrease) in state tax collections two years into the future. The association appears to be attenuated in states with restrictive tax policies (i.e. unitary/combined reporting andrelated party add-back provisions) suggesting that enforcement and restrictive tax policies could serve as substitutes.

Keywords: State corporate income tax, tax enforcement, state income tax collections

Suggested Citation

Gupta, Sanjay and Lynch, Dan, The Effects of Changes in State Tax Enforcement on Corporate Income Tax Collections (September 1, 2015). Journal of American Taxation Association, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2003913

Sanjay Gupta (Contact Author)

Michigan State University - Eli Broad College of Business ( email )

632 Bogue Street, 520 BCC
East Lansing, MI 48824
United States
517-432-6488 (Phone)

HOME PAGE: http://www.broad.msu.edu/

Dan Lynch

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

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